Fears that the UK economy is heading back into recession were heightened by a leading economic thinktank on Monday when it said the outlook for activity had deteriorated for a seventh straight month.

At the start of a week that will provide a snapshot of inflation, unemployment and high-street spending, the Organisation for Economic Co-operation and Development (OECD) appeared to bear out the main charge made by Labour: that the slowdown in the UK economy predated the intensification of the eurozone crisis.

But the OECD report also showed Britain was not alone in experiencing a gloomier economic outlook, with the other six members of the G7 group of industrial nations – the US, Canada, Germany, Japan, Italy and France – all experiencing slowdowns. The darkening international picture will enable the government to argue that weaker growth, higher unemployment and a bigger budget deficit are the result of factors beyond its control.

The debate will resonate beyond George Osborne's autumn statement at the end of this month because it will decide which of two political narratives is believed by the electorate.

The chancellor's case is that the government's deficit-reduction plan has spared Britain the financial traumas of Italy and Greece, and that the state of the domestic economy is relatively sound. He will point to the slightly stronger than expected 0.5% growth for the third quarter and the resilience shown by retail sales in September.

Chuka Umunna, the shadow business secretary, said: "Our domestic economy has faltered. In a marked change of tone, the government is now predicting the worst and seeking to attribute blame, wholesale, to the eurozone crisis. But our economy was faltering long before the crisis became such an issue, with stagnant growth for over 12 months.

"The situation is likely to become more difficult going forward but this has been compounded by the government's too far, too fast approach to deficit reduction."

Labour's argument has three main strands: the slowdown in the economy began in autumn 2010, but it was not until summer 2011 that Italy and Spain were dragged into the eurozone crisis; growth will be much lower both this year and next than Osborne forecast; and the main reason for sluggish growth has been weak consumer spending, influenced by higher inflation, rather than a drop off in exports.

The Office for Budget Responsibility, the independent body set up by Osborne that is now responsible for the government's economic forecasts, said at the time of the March 2011 budget that it expected the economy to grow by 1.7% this year and 2.5% in 2012. After growing by just 0.5% in the four quarters ending in September 2011, these predictions now look well wide of the mark and will be cut sharply in the autumn statement.

Howard Archer, UK economist for IHS Global Insight, said: "The further deterioration in the OECD's leading indicator for September for the UK, fuels concerns that the economy is in serious danger of relapsing back into recession.

"In our recently completed November forecast, we have forecast UK GDP growth to be limited to just 0.8% in 2012 following likely expansion of 0.9% in 2011. We currently expect the economy to be stagnant over the fourth quarter of 2011 and the first quarter of 2012 before returning to gradual growth, but it is very possible that contraction will occur especially if there is no significant, sustained easing in the eurozone's sovereign debt problems."

On the face of it, this is bad news for the coalition. The expectation 18 months ago was that the government would have a tough first year, but by now there would be signs of the economy picking up. Stronger growth in 2012 would leave voters with the feeling Osborne's deficit-reduction plan had paid off, creating a good backdrop for re-election in 2015. That timescale has been put back by at least one year.

But the eurozone's fight for survival provides the chancellor with a response when his Labour shadow, Ed Balls, attacks him for going too far, too fast: there is little doubt the turmoil in the financial markets is making credit more difficult and expensive to come by, while Europe's own economic slowdown is hurting UK exports.

"With the eurozone crisis entering a far more dangerous phase last week, the threats posed to the UK from overseas are looming ever larger," said Vicky Redwood of Capital Economics. "September's trade data, showing a sharp drop in export volumes to the EU, suggested that the eurozone crisis has already started to take its toll on UK exporters."